BILL NUMBER: SB 1819	CHAPTERED  09/27/00

	CHAPTER   789
	FILED WITH SECRETARY OF STATE   SEPTEMBER 27, 2000
	APPROVED BY GOVERNOR   SEPTEMBER 27, 2000
	PASSED THE SENATE   AUGUST 25, 2000
	PASSED THE ASSEMBLY   AUGUST 21, 2000
	AMENDED IN ASSEMBLY   AUGUST 11, 2000
	AMENDED IN ASSEMBLY   JUNE 29, 2000
	AMENDED IN SENATE   MAY 2, 2000
	AMENDED IN SENATE   APRIL 13, 2000
	AMENDED IN SENATE   APRIL 3, 2000

INTRODUCED BY   Senator Dunn

                        FEBRUARY 24, 2000

   An act to amend Section 11713.3 of the Vehicle Code, relating to
vehicles.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1819, Dunn.  Motor vehicle franchises:  restriction.
   (1) Existing law prohibits any motor vehicle manufacturer,
manufacturer branch, distributor, or distributor branch that is
licensed under the Vehicle Code from engaging in certain conduct
involving a dealer having a franchise for the sale of new vehicles or
vehicle parts including prohibiting those manufacturers, branches,
and distributors from competing with a dealer, as specified, or
engaging in unfair discrimination in favor of any dealership owned or
controlled by those entities.
   This bill would allow these manufacturers, branches, and
distributors or any entity that is controlled by a manufacturer,
branch, or, distributor to compete under specified limited
circumstances and would specify conduct that constitutes unfair
discrimination.
   The bill would also require every manufacturer, branch, and
distributor that owns or operates a dealership, as specified, to give
written notice to the board each time a manufacturer, branch, or
distributor assumes operation of a dealership or acquires or divests
itself of an ownership interest in a dealership.
   Because a violation of these provisions would be a crime, the bill
would impose a state-mandated local program.
   The bill would also set forth legislative findings and
declarations regarding independent, franchised new motor vehicle
dealers.
   (2) This bill would incorporate changes to Section 11713.3 of the
Vehicle Code made by AB 1912 if both this bill and AB 1912 are
chaptered and this bill is chaptered last.
  (3) The California Constitution requires the state to reimburse
local agencies and school districts for certain costs mandated by the
state.  Statutory provisions establish procedures for making that
reimbursement.
   This bill would provide that no reimbursement is required by this
act for a specified reason.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  The Legislature finds and declares all of the
following:
   (a) The distribution, sale, and service of new motor vehicles in
the State of California vitally affects the general economy of this
state and the public welfare.
   (b) The new motor vehicle franchise system, which operates within
a strictly defined and highly regulated statutory scheme, assures the
consuming public of a well organized distribution system for the
availability and sale of new motor vehicles throughout the state;
provides a network of quality warranty and repair facilities to
maintain those vehicles; and creates a cost-effective method for the
state to police those systems through the licensing and regulation of
private sector franchisors and franchisees.
   (c) It is the intent of this act to ensure fair competition among
new motor vehicle dealer franchisees that are independently owned and
those owned by their franchisors, and to clarify that the
prohibition under existing law against franchisor ownership of a
dealership located within a 10-mile radius of a nonfranchisor-owned
dealership of the same line-make is subject only to certain limited
exceptions that may not be used to justify any improper purpose,
including the consolidation of privately owned dealerships by a
sophisticated investor or operator posing as a dealer development
candidate.
  SEC. 2.  Section 11713.3 of the Vehicle Code is amended to read:
   11713.3.  It is unlawful and a violation of this code for any
manufacturer, manufacturer branch, distributor, or distributor branch
licensed under this code to do any of the following:
   (a) To refuse or fail to deliver in reasonable quantities and
within a reasonable time after receipt of an order from a dealer
having a franchise for the retail sale of any new vehicle sold or
distributed by the manufacturer or distributor, any new vehicle or
parts or accessories to new vehicles as are covered by the franchise,
if the vehicle, parts, or accessories are publicly advertised as
being available for delivery or actually being delivered.  This
subdivision is not violated, however, if the failure is caused by
acts or causes beyond the control of the manufacturer, manufacturer
branch, distributor, or distributor branch.
   (b) To prevent or require, or attempt to prevent or require, by
contract or otherwise, any change in the capital structure of a
dealership or the means by or through which the dealer finances the
operation of the dealership, provided that the dealer at all times
meets any reasonable capital standards agreed to by the dealer and
the manufacturer or distributor, and also provided that no change in
capital structure shall cause a change in the principal management or
have the effect of a sale of the franchise without the consent of
the manufacturer or distributor.
   (c) To prevent or require, or attempt to prevent or require, a
dealer to change the executive management of a dealership, other than
the principal dealership operator or operators if the franchise was
granted the dealer in reliance upon the personal qualifications of
such person or persons.
   (d) (1) Except as provided in subdivision (t), to prevent or
require, or attempt to prevent or require, by contract or otherwise,
any dealer, or any officer, partner, or stockholder of any
dealership, the sale or transfer of any part of the interest of any
of them to any other person or persons.  No dealer, officer, partner,
or stockholder shall, however, have the right to sell, transfer, or
assign the franchise, or any right thereunder, without the consent of
the manufacturer or distributor except that the consent shall not be
unreasonably withheld.
   (2) (A) For the transferring franchisee to fail, prior to the
sale, transfer, or assignment of a franchisee or the sale,
assignment, or transfer of all or substantially all of the assets of
the franchised business or a controlling interest in the franchised
business to another person, to notify the manufacturer or distributor
of the franchisee's decision to sell, transfer, or assign the
franchise.  The notice shall be in writing and shall include all of
the following:
   (i) The proposed transferee's name and address.
   (ii) A copy of all of the agreements relating to the sale,
assignment, or transfer of the franchised business or its assets.
   (iii) The proposed transferee's application for approval to become
the successor franchisee.  The application shall include forms and
related information generally utilized by the manufacturer or
distributor in reviewing prospective franchisees, if those forms are
readily made available to existing franchisees.  As soon as
practicable after receipt of the proposed transferee's application,
the manufacturer or distributor shall notify the franchisee and the
proposed transferee of any information needed to make the application
complete.
   (B) For the manufacturer or distributor, to fail on or before 60
days after the receipt of all of the information required pursuant to
subparagraph (A), or as extended by a written agreement between the
manufacturer or distributor and the franchisee, to notify the
franchisee of the approval or the disapproval of the sale, transfer,
or assignment of the franchise.  The notice shall be in writing and
shall be personally served or sent by certified mail, return receipt
requested, or by guaranteed overnight delivery service that provides
verification of delivery and shall be directed to the franchisee.
Any proposed sale, assignment, or transfer shall be deemed approved,
unless disapproved by the franchisor in the manner provided by this
subdivision.  If the proposed sale, assignment, or transfer is
disapproved, the franchisor shall include in the notice of
disapproval a statement setting forth the reasons for the
disapproval.
   (3) In any action in which the manufacturer's or distributor's
withholding of consent under this subdivision or subdivision (e) is
an issue, whether the withholding of consent was unreasonable is a
question of fact requiring consideration of all the existing
circumstances.
   (e) To prevent, or attempt to prevent, a dealer from receiving
fair and reasonable compensation for the value of the franchised
business.  There shall be no transfer or assignment of the dealer's
franchise without the consent of the manufacturer or distributor,
which consent shall not be unreasonably withheld or conditioned upon
the release, assignment, novation, waiver, estoppel, or modification
of any claim or defense by the dealer.
   (f) To obtain money, goods, service, or any other benefit from any
other person with whom the dealer does business, on account of, or
in relation to, the transaction between the dealer and that other
person, other than for compensation for services rendered, unless the
benefit is promptly accounted for, and transmitted to, the dealer.
   (g) To require a dealer to prospectively assent to a release,
assignment, novation, waiver, or estoppel which would relieve any
person from liability to be imposed by this article or to require any
controversy between a dealer and a manufacturer, distributor, or
representative, to be referred to any person other than the board, if
the referral would be binding on the dealer.  This subdivision does
not, however, prohibit arbitration before an independent arbitrator.

   (h) To increase prices of motor vehicles which the dealer had
ordered for private retail consumers prior to the dealer's receipt of
the written official price increase notification.  A sales contract
signed by a private retail consumer is evidence of each order.  In
the event of manufacturer price reductions, the amount of the
reduction received by a dealer shall be passed on to the private
retail consumer by the dealer if the retail price was negotiated on
the basis of the previous higher price to the dealer.  Price
reductions apply to all vehicles in the dealer's inventory which were
subject to the price reduction.  Price differences applicable to new
model or series motor vehicles at the time of the introduction of
new models or series shall not be considered a price increase or
price decrease.  Price changes caused by either (1) the addition to a
motor vehicle of required or optional equipment pursuant to state or
federal law, or (2) revaluation of the United States dollar in the
case of foreign-make vehicles, are not subject to this subdivision.
   (i) To fail to pay to a dealer, within a reasonable time following
receipt of a valid claim by a dealer thereof, any payment agreed to
be made by the manufacturer or distributor to the dealer by reason of
the fact that a new vehicle of a prior year model is in the dealer's
inventory at the time of introduction of new model vehicles.
   (j) To deny the widow or heirs designated by a deceased owner of a
dealership, the opportunity to participate in the ownership of the
dealership or successor dealership under a valid franchise for a
reasonable time after the death of the owner.
   (k) To offer any refunds or other types of inducements to any
person for the purchase of new motor vehicles of a certain line-make
to be sold to the state or any political subdivision thereof without
making the same offer to all other dealers in the same line-make
within the relevant market area.
   (l) To modify, replace, enter into, relocate, terminate or refuse
to renew a franchise in violation of Article 4 (commencing with
Section 3060) of Chapter 6 of Division 2.
   (m) To employ a person as a representative who has not been
licensed pursuant to Article 3 (commencing with Section 11900) of
Chapter 4 of Division 5.
   (n) To deny any dealer the right of free association with any
other dealer for any lawful purpose.
   (o) (1) To compete with a dealer in the same line-make operating
under an agreement or franchise from a manufacturer or distributor in
the relevant market area.
   (2) A manufacturer, branch, or distributor or any entity that
controls or is controlled by, a manufacturer, branch, or distributor,
shall not, however, be deemed to be competing in the following
limited circumstances:
   (A) Owning or operating a dealership for a temporary period, not
to exceed one year.  However, after a showing of good cause by a
manufacturer, branch, or distributor that it needs additional time to
operate a dealership in preparation for sale to a successor
independent franchisee, the board may extend the time period.  The
board shall extend the time period until December 31, 2002, for any
manufacturer that meets all of the following requirements:
   (i) The manufacturer has no more than 25 franchisees in the state
and those franchisees collectively operate dealership facilities in
at least 15 counties of the state.
   (ii) All of the dealership facilities operated by the manufacturer'
s franchisees in the state trade exclusively in the manufacturer's
line-make.
   (iii) No fewer than one-half of the manufacturer's franchisees in
the state own and operate two or more dealership facilities in their
assigned areas of responsibility.
   (iv) The manufacturer holds a temporary ownership interest in no
more than two dealerships in the state that are located in the
relevant market area of any other franchisee of the same line-make
not owned, in whole or part, by the manufacturer.
   (B) Owning an interest in a dealer as part of a bona fide dealer
development program that satisfies all of the following requirements:

   (i) The sole purpose of the program is to make franchises
available to persons lacking capital, training, business experience,
or other qualities ordinarily required of prospective franchisees and
the dealer development candidate is an individual who is unable to
acquire the franchise without assistance of the program.
   (ii) The dealer development candidate has made a significant
investment subject to loss in the franchised business of the dealer.

   (iii) The program requires the dealer development candidate to
manage the day-to-day operations and business affairs of the dealer
and to acquire, within a reasonable time and on reasonable terms and
conditions, beneficial ownership and control of a majority interest
in the dealer and disassociation of any direct or indirect ownership
or control by the manufacturer, branch, or distributor.
   (C) Owning a wholly owned subsidiary corporation of a distributor
that sells motor vehicles at retail, if, for at least three years
prior to January 1, 1973, the subsidiary corporation has been a
wholly owned subsidiary of the distributor and engaged in the sale of
vehicles at retail.
   (3) (A) Every manufacturer, branch, and distributor that owns or
operates a dealership in the manner described in subparagraph (A) of
paragraph (2) shall give written notice to the board, within 10 days,
each time it commences or terminates operation of a dealership and
each time it acquires or divests itself of an ownership interest.
   (B) Every manufacturer, branch, and distributor that owns an
interest in a dealer in the manner described in subparagraph (B) of
paragraph (2) shall give written notice to the board, annually, of
the name and location of each dealer in which it has an ownership
interest.
   (p) To unfairly discriminate among its franchisees with respect to
warranty reimbursement or authority granted its franchisees to make
warranty adjustments with retail customers.
   (q) To sell vehicles to persons not licensed under this chapter
for resale.
   (r) To fail to affix an identification number to any park trailer,
as described in subdivision (b) of Section 18010 of the Health and
Safety Code, which is manufactured on or after January 1, 1987, and
which does not clearly identify the unit as a park trailer to the
department.  The configuration of the identification number shall be
approved by the department.
   (s) To dishonor a warranty, rebate, or other incentive offered to
the public or a dealer in connection with the retail sale of a new
motor vehicle, based solely upon the fact that an autobroker arranged
or negotiated the sale.  This subdivision shall not prohibit the
disallowance of that rebate or incentive if the purchaser or dealer
is ineligible to receive the rebate or incentive pursuant to any
other term or condition of a rebate or incentive program.
   (t) To exercise a right of first refusal or any other right
requiring a franchisee or any owner thereof to sell, transfer, or
assign to the franchisor, or to any nominee of the franchisor, all or
any material part of the franchised business or of the assets
thereof unless all of the following requirements are met:
   (1) The franchise authorizes the franchisor to exercise a right of
first refusal to acquire the franchised business or assets thereof
in the event of a proposed sale, transfer or assignment.
   (2) The franchisor gives written notice of its exercise of the
right of first refusal no later than 45 days after the franchisor
receives all of the information required pursuant to subparagraph (A)
of paragraph (2) of subdivision (d).
   (3) The sale, transfer, or assignment being proposed relates to
not less than all or substantially all of the assets of the
franchised business or to a controlling interest in the franchised
business.
   (4) The proposed transferee is neither a family member of an owner
of the franchised business, nor a managerial employee of the
franchisee owning 15 percent or more of the franchised business, nor
a corporation, partnership, or other legal entity owned by the
existing owners of the franchised business.  For purposes of this
paragraph, a "family member" means the spouse of an owner of the
franchised business, the child, grandchild, brother, sister, or
parent of an owner, or a spouse of one of those family members.
Nothing contained in this paragraph limits the rights of the
franchisor to disapprove a proposed transferee as provided in
subdivision (d).
   (5) Upon the franchisor's exercise of the right of first refusal,
the consideration paid by the franchisor to the franchisee and owners
of the franchised business shall equal or exceed all consideration
that each of them were to have received under the terms of, or in
connection with, the proposed sale, assignment, or transfer, and the
franchisor shall comply with all the terms and conditions of the
agreement or agreements to sell, transfer, or assign the franchised
business.
   (6) The franchisor shall reimburse the proposed transferee for any
expenses paid or incurred by the proposed transferee in evaluating,
investigating, and negotiating the proposed transfer to the extent
those expenses do not exceed the usual, customary, and reasonable
fees charged for similar work done in the area in which the
franchised business is located.  These expenses include, but are not
limited to, legal and accounting expenses, and expenses incurred for
title reports and environmental or other investigations of any real
property on which the franchisee's operations are conducted.  The
proposed transferee shall provide the franchisor a written
itemization of those expenses, and a copy of all nonprivileged
reports and studies for which expenses were incurred, if any, within
30 days of the proposed transferee's receipt of a written request
from the franchisor for that accounting.  The franchisor shall make
payment within 30 days of exercising the right of first refusal.
   (u) (1) To unfairly discriminate in favor of any dealership owned
or controlled, in whole or part, by a manufacturer or distributor or
an entity that controls or is controlled by the manufacturer or
distributor.  Unfair discrimination includes, but is not limited to
the following:
   (A) The furnishing to any franchisee or dealer that is owned or
controlled, in whole or part, by a manufacturer, branch or
distributor any of the following:
   (i) Any vehicle that is not made available to each franchisee
pursuant to a reasonable allocation formula that is applied
uniformly, and any part or accessory that is not made available to
all franchisees on an equal basis when there is no reasonable
allocation formula that is applied uniformly.
   (ii) Any vehicle, part, or accessory that is not made available to
each franchisee on comparable delivery terms, including time of
delivery after placement of order.  Differences in delivery terms due
to geographic distances or other factors beyond the control of the
manufacturer, branch, or distributor shall not constitute unfair
competition.
   (iii) Any information obtained from a franchisee by the
manufacturer, branch, or distributor concerning the business affairs
or operations of any franchisee in which the manufacturer, branch, or
distributor does not have an ownership interest.  The information
includes, but is not limited to, information contained in financial
statements and operating reports, the name, address, or other
personal information or buying, leasing, or service behavior of any
dealer customer, and any other information which if provided to a
franchisee or dealer owned or controlled by a manufacturer or
distributor would give that franchisee or dealer a competitive
advantage.  This clause does not apply if the information is provided
pursuant to a subpoena or court order, or to aggregated information
made available to all franchisees.
   (B) Referring a prospective purchaser or lessee to a dealer in
which a manufacturer, branch, or distributor has an ownership
interest unless the prospective purchaser or lessee resides in the
area of responsibility assigned to that dealer or the prospective
purchaser or lessee requests to be referred to that dealer.
   (2) Nothing in this subdivision shall be interpreted to prohibit a
franchisor from granting a franchise to prospective franchisees or
assisting those franchisees during the course of the franchise
relationship as part of a program or programs to make franchises
available to persons lacking capital, training, business experience,
or other qualifications ordinarily required of prospective
franchisees.
   (v) As used in this section, "area of responsibility" is a
geographic area specified in a franchise that is used by the
franchisor for the purpose of evaluating the franchisee's performance
of its sales and service obligations.
  SEC. 2.5.  Section 11713.3 of the Vehicle Code is amended to read:

   11713.3.  It is unlawful and a violation of this code for any
manufacturer, manufacturer branch, distributor, or distributor branch
licensed under this code to do any of the following:
   (a) To refuse or fail to deliver in reasonable quantities and
within a reasonable time after receipt of an order from a dealer
having a franchise for the retail sale of any new vehicle sold or
distributed by the manufacturer or distributor, any new vehicle or
parts or accessories to new vehicles as are covered by the franchise,
if the vehicle, parts, or accessories are publicly advertised as
being available for delivery or actually being delivered.  This
subdivision is not violated, however, if the failure is caused by
acts or causes beyond the control of the manufacturer, manufacturer
branch, distributor, or distributor branch.
   (b) To prevent or require, or attempt to prevent or require, by
contract or otherwise, any change in the capital structure of a
dealership or the means by or through which the dealer finances the
operation of the dealership, provided that the dealer at all times
meets any reasonable capital standards agreed to by the dealer and
the manufacturer or distributor, and also provided that no change in
capital structure shall cause a change in the principal management or
have the effect of a sale of the franchise without the consent of
the manufacturer or distributor.
   (c) To prevent or require, or attempt to prevent or require, a
dealer to change the executive management of a dealership, other than
the principal dealership operator or operators if the franchise was
granted the dealer in reliance upon the personal qualifications of
such person or persons.
   (d) (1) Except as provided in subdivision (t), to prevent or
require, or attempt to prevent or require, by contract or otherwise,
any dealer, or any officer, partner, or stockholder of any
dealership, the sale or transfer of any part of the interest of any
of them to any other person or persons.  No dealer, officer, partner,
or stockholder shall, however, have the right to sell, transfer, or
assign the franchise, or any right thereunder, without the consent of
the manufacturer or distributor except that the consent shall not be
unreasonably withheld.
   (2) (A) For the transferring franchisee to fail, prior to the
sale, transfer, or assignment of a franchisee or the sale,
assignment, or transfer of all or substantially all of the assets of
the franchised business or a controlling interest in the franchised
business to another person, to notify the manufacturer or distributor
of the franchisee's decision to sell, transfer, or assign the
franchise.  The notice shall be in writing and shall include all of
the following:
   (i) The proposed transferee's name and address.
   (ii) A copy of all of the agreements relating to the sale,
assignment, or transfer of the franchised business or its assets.
   (iii) The proposed transferee's application for approval to become
the successor franchisee.  The application shall include forms and
related information generally utilized by the manufacturer or
distributor in reviewing prospective franchisees, if those forms are
readily made available to existing franchisees.  As soon as
practicable after receipt of the proposed transferee's application,
the manufacturer or distributor shall notify the franchisee and the
proposed transferee of any information needed to make the application
complete.
   (B) For the manufacturer or distributor, to fail on or before 60
days after the receipt of all of the information required pursuant to
subparagraph (A), or as extended by a written agreement between the
manufacturer or distributor and the franchisee, to notify the
franchisee of the approval or the disapproval of the sale, transfer,
or assignment of the franchise.  The notice shall be in writing and
shall be personally served or sent by certified mail, return receipt
requested, or by guaranteed overnight delivery service that provides
verification of delivery and shall be directed to the franchisee.
Any proposed sale, assignment, or transfer shall be deemed approved,
unless disapproved by the franchisor in the manner provided by this
subdivision.  If the proposed sale, assignment, or transfer is
disapproved, the franchisor shall include in the notice of
disapproval a statement setting forth the reasons for the
disapproval.
   (3) In any action in which the manufacturer's or distributor's
withholding of consent under this subdivision or subdivision (e) is
an issue, whether the withholding of consent was unreasonable is a
question of fact requiring consideration of all the existing
circumstances.
   (e) To prevent, or attempt to prevent, a dealer from receiving
fair and reasonable compensation for the value of the franchised
business.  There shall be no transfer or assignment of the dealer's
franchise without the consent of the manufacturer or distributor,
which consent shall not be unreasonably withheld or conditioned upon
the release, assignment, novation, waiver, estoppel, or modification
of any claim or defense by the dealer.
   (f) To obtain money, goods, service, or any other benefit from any
other person with whom the dealer does business, on account of, or
in relation to, the transaction between the dealer and that other
person, other than for compensation for services rendered, unless the
benefit is promptly accounted for, and transmitted to, the dealer.
   (g) To require a dealer to prospectively assent to a release,
assignment, novation, waiver, or estoppel which would relieve any
person from liability to be imposed by this article or to require any
controversy between a dealer and a manufacturer, distributor, or
representative, to be referred to any person other than the board, if
the referral would be binding on the dealer.  This subdivision does
not, however, prohibit arbitration before an independent arbitrator.

   (h) To increase prices of motor vehicles which the dealer had
ordered for private retail consumers prior to the dealer's receipt of
the written official price increase notification.  A sales contract
signed by a private retail consumer is evidence of each such order.
In the event of manufacturer price reductions, the amount of the
reduction received by a dealer shall be passed on to the private
retail consumer by the dealer if the retail price was negotiated on
the basis of the previous higher price to the dealer.  Price
reductions apply to all vehicles in
           the dealer's inventory which were subject to the price
reduction.  Price differences applicable to new model or series motor
vehicles at the time of the introduction of new models or series
shall not be considered a price increase or price decrease.  Price
changes caused by either (1) the addition to a motor vehicle of
required or optional equipment pursuant to state or federal law, or
(2) revaluation of the United States dollar in the case of
foreign-make vehicles, are not subject to this subdivision.
   (i) To fail to pay to a dealer, within a reasonable time following
receipt of a valid claim by a dealer thereof, any payment agreed to
be made by the manufacturer or distributor to the dealer by reason of
the fact that a new vehicle of a prior year model is in the dealer's
inventory at the time of introduction of new model vehicles.
   (j) To deny the widow or heirs designated by a deceased owner of a
dealership, the opportunity to participate in the ownership of the
dealership or successor dealership under a valid franchise for a
reasonable time after the death of the owner.
   (k) To offer any refunds or other types of inducements to any
person for the purchase of new motor vehicles of a certain line-make
to be sold to the state or any political subdivision thereof without
making the same offer to all other dealers in the same line-make
within the relevant market area.
   (l) To modify, replace, enter into, relocate, terminate or refuse
to renew a franchise in violation of Article 4 (commencing with
Section 3060) of Chapter 6 of Division 2.
   (m) To employ a person as a representative who has not been
licensed pursuant to Article 3 (commencing with Section 11900) of
Chapter 4 of Division 5.
   (n) To deny any dealer the right of free association with any
other dealer for any lawful purpose.
   (o) (1) To compete with a dealer in the same line-make operating
under an agreement or franchise from a manufacturer or distributor in
the relevant market area.
   (2) A manufacturer, branch, or distributor or any entity that
controls or is controlled by, a manufacturer, branch, or distributor,
shall not, however, be deemed to be competing in the following
limited circumstances:
   (A) Owning or operating a dealership for a temporary period, not
to exceed one year.  However, after a showing of good cause by a
manufacturer, branch, or distributor that it needs additional time to
operate a dealership in preparation for sale to a successor
independent franchisee, the board may extend the time period.  The
board shall extend the time period until December 31, 2002, for any
manufacturer that meets all of the following requirements:
   (i) The manufacturer has no more than 25 franchisees in the state
and those franchisees collectively operate dealership facilities in
at least 15 counties of the state.
   (ii) All of the dealership facilities operated by the manufacturer'
s franchisees in the state trade exclusively in the manufacturer's
line-make.
   (iii) No fewer than one-half of the manufacturer's franchisees in
the state own and operate two or more dealership facilities in their
assigned areas of responsibility.
   (iv) The manufacturer holds a temporary ownership interest in no
more than two dealerships in the state that are located in the
relevant market area of any other franchisee of the same line-make
not owned, in whole or part, by the manufacturer.
   (B) Owning an interest in a dealer as part of a bona fide dealer
development program that satisfies all of the following requirements:

   (i) The sole purpose of the program is to make franchises
available to persons lacking capital, training, business experience,
or other qualities ordinarily required of prospective franchisees and
the dealer development candidate is an individual who is unable to
acquire the franchise without assistance of the program.
   (ii) The dealer development candidate has made a significant
investment subject to loss in the franchised business of the dealer.

   (iii) The program requires the dealer development candidate to
manage the day-to-day operations and business affairs of the dealer
and to acquire, within a reasonable time and on reasonable terms and
conditions, beneficial ownership and control of a majority interest
in the dealer and disassociation of any direct or indirect ownership
or control by the manufacturer, branch, or distributor.
   (C) Owning a wholly owned subsidiary corporation of a distributor
that sells motor vehicles at retail, if, for at least three years
prior to January 1, 1973, the subsidiary corporation has been a
wholly owned subsidiary of the distributor and engaged in the sale of
vehicles at retail.
   (3) (A) Every manufacturer, branch, and distributor that owns or
operates a dealership in the manner described in subparagraph (A) of
paragraph (2) shall give written notice to the board, within 10 days,
each time it commences or terminates operation of a dealership and
each time it acquires or divests itself of an ownership interest.
   (B) Every manufacturer, branch, and distributor that owns an
interest in a dealer in the manner described in subparagraph (B) of
paragraph (2) shall give written notice to the board, annually, of
the name and location of each dealer in which it has an ownership
interest.
   (p) To unfairly discriminate among its franchisees with respect to
warranty reimbursement or authority granted its franchisees to make
warranty adjustments with retail customers.
   (q) To sell vehicles to persons not licensed under this chapter
for resale.
   (r) To fail to affix an identification number to any park trailer,
as described in Section 18009.3 of the Health and Safety Code, that
is manufactured on or after January 1, 1987, and which does not
clearly identify the unit as a park trailer to the department.  The
configuration of the identification number shall be approved by the
department.
   (s) To dishonor a warranty, rebate, or other incentive offered to
the public or a dealer in connection with the retail sale of a new
motor vehicle, based solely upon the fact that an autobroker arranged
or negotiated the sale.  This subdivision shall not prohibit the
disallowance of that rebate or incentive if the purchaser or dealer
is ineligible to receive the rebate or incentive pursuant to any
other term or condition of a rebate or incentive program.
   (t) To exercise a right of first refusal or any other right
requiring a franchisee or any owner thereof to sell, transfer, or
assign to the franchisor, or to any nominee of the franchisor, all or
any material part of the franchised business or of the assets
thereof unless all of the following requirements are met:
   (1) The franchise authorizes the franchisor to exercise a right of
first refusal to acquire the franchised business or assets thereof
in the event of a proposed sale, transfer or assignment.
   (2) The franchisor gives written notice of its exercise of the
right of first refusal no later than 45 days after the franchisor
receives all of the information required pursuant to subparagraph (A)
of paragraph (2) of subdivision (d).
   (3) The sale, transfer, or assignment being proposed relates to
not less than all or substantially all of the assets of the
franchised business or to a controlling interest in the franchised
business.
   (4) The proposed transferee is neither a family member of an owner
of the franchised business, nor a managerial employee of the
franchisee owning 15 percent or more of the franchised business, nor
a corporation, partnership, or other legal entity owned by the
existing owners of the franchised business.  For purposes of this
paragraph, a "family member" means the spouse of an owner of the
franchised business, the child, grandchild, brother, sister, or
parent of an owner, or a spouse of one of those family members.
Nothing contained in this paragraph limits the rights of the
franchisor to disapprove a proposed transferee as provided in
subdivision (d).
   (5) Upon the franchisor's exercise of the right of first refusal,
the consideration paid by the franchisor to the franchisee and owners
of the franchised business shall equal or exceed all consideration
that each of them were to have received under the terms of, or in
connection with, the proposed sale, assignment, or transfer, and the
franchisor shall comply with all the terms and conditions of the
agreement or agreements to sell, transfer, or assign the franchised
business.
   (6) The franchisor shall reimburse the proposed transferee for any
expenses paid or incurred by the proposed transferee in evaluating,
investigating, and negotiating the proposed transfer to the extent
those expenses do not exceed the usual, customary, and reasonable
fees charged for similar work done in the area in which the
franchised business is located.  These expenses include, but are not
limited to, legal and accounting expenses, and expenses incurred for
title reports and environmental or other investigations of any real
property on which the franchisee's operations are conducted.  The
proposed transferee shall provide the franchisor a written
itemization of those expenses, and a copy of all nonprivileged
reports and studies for which expenses were incurred, if any, within
30 days of the proposed transferee's receipt of a written request
from the franchisor for that accounting.  The franchisor shall make
payment within 30 days of exercising the right of first refusal.
   (u) (1) To unfairly discriminate in favor of any dealership owned
or controlled, in whole or part, by a manufacturer or distributor or
an entity that controls or is controlled by the manufacturer or
distributor.  Unfair discrimination includes, but is not limited to,
the following:
   (A) The furnishing to any franchisee or dealer that is owned or
controlled, in whole or part, by a manufacturer, branch or
distributor of any of the following:
   (i) Any vehicle that is not made available to each franchisee
pursuant to a reasonable allocation formula that is applied
uniformly, and any part or accessory that is not made available to
all franchisees on an equal basis when there is no reasonable
allocation formula that is applied uniformly.
   (ii) Any vehicle, part, or accessory that is not made available to
each franchisee on comparable delivery terms, including time of
delivery after placement of order.  Differences in delivery terms due
to geographic distances or other factors beyond the control of the
manufacturer, branch, or distributor shall not constitute unfair
competition.
   (iii) Any information obtained from a franchisee by the
manufacturer, branch, or distributor concerning the business affairs
or operations of any franchisee in which the manufacturer, branch, or
distributor does not have an ownership interest.  The information
includes, but is not limited to, information contained in financial
statements and operating reports, the name, address, or other
personal information or buying, leasing, or service behavior of any
dealer customer, and any other information which if provided to a
franchisee or dealer owned or controlled by a manufacturer or
distributor would give that franchisee or dealer a competitive
advantage.  This clause does not apply if the information is provided
pursuant to a subpoena or court order, or to aggregated information
made available to all franchisees.
   (B) Referring a prospective purchaser or lessee to a dealer in
which a manufacturer, branch, or distributor has an ownership
interest unless the prospective purchaser or lessee resides in the
area of responsibility assigned to that dealer or the prospective
purchaser or lessee requests to be referred to that dealer.
   (2) Nothing in this subdivision shall be interpreted to prohibit a
franchisor from granting a franchise to prospective franchisees or
assisting those franchisees during the course of the franchise
relationship as part of a program or programs to make franchises
available to persons lacking capital, training, business experience,
or other qualifications ordinarily required of prospective
franchisees.
   (v) As used in this section, "area of responsibility" is a
geographic area specified in a franchise that is used by the
franchisor for the purpose of evaluating the franchisee's performance
of its sales and service obligations.
  SEC. 2.7.  Section 2.5 of this bill incorporates amendments to
Section 11713.3 of the Vehicle Code proposed by both this bill and AB
1912.  It shall only become operative if (1) both bills are enacted
and become effective on or before January 1, 2001, (2) each bill
amends Section 11713.3 of the Vehicle Code, and (3) this bill is
enacted after AB 1912, in which case Section 2 of this bill shall not
become operative.
  SEC. 3.  No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.
